Commentary on the economic , geopolitical and simply fascinating things going on. Served occasionally with a side of snark.

Monday, March 24, 2014

Spain in Focus ! First Crimea voted to leave Ukraine and Venice just voted to secede from Rome ....... A more important referendum looms in Spain with Catalonian ...... Spain is facing not just growing protests as dissatisfaction grows along with rampant unemployment - however a Catalan secession Referendum vote is coming to a head this Fall .......

Spain’s Constitutional Court has ruled that a referendum in Catalonia on independence from the rest of the country would violate the law, saying that regions within Spain “cannot unilaterally call a referendum on self-determination.”

According to a summary of the ruling, any “right to decide” their future by Catalans has to be in accordance with Spain's 1978 constitution, which stipulates Spanish unity.

The Constitutional Court ruled “unconstitutional and null” a declaration by the regional parliament in Barcelona which claimed that Catalonia has the right of self-determination.

The fate of the region rests on the power struggle between Catalan President Artur Mas who had promised a referendum on independence from Spain on November 9 and the Spanish Prime Minister Mariano Rajoy who insists that such a vote would be illegal.

“No one can unilaterally deprive the entire Spanish people of the right to decide on their future,”Rajoy told the national parliament last month insisting that the referendum “can't take place.”

Rajoy remains certain that Catalonia cannot be compared to Scotland's aspiration of succession from the UK, because the Spanish written constitution, unlike British, rules out such a move.

But in Catalonia, March's public opinion poll showed that 59.6 percent of the population want independence from the rest of Spain and want their region to become a “new state of Europe.”

Catalonia, an autonomous community with a population of 7.5 million is responsible for around one-fifth of the country’s GDP and one-quarter of its taxes. Public sentiment believes that the region will be much better off financially if they secede from Madrid.

The situation is aggravated by the economic crisis, which is forcing the Spanish government to adopt painful austerity policies.

In January the Catalan Parliament voted to send a petition to the national legislature seeking the power to hold the vote. That initiative is still in the process. If successful the referendum in Catalonia will be a month after a similar vote in Scotland, which is slated for September 2014.

These are the words that Isidro Fainé, the CEO of Catalonia’s megabank La Caixa, is alleged to have said to the region’s president, Artur Mas, during a private face-to-face meeting last year.

Like many of Spain’s business and finance big shots, Fainé is growing a little jittery over the prospect of Catalonian independence – and with good reason. The last thing transnational companies or banks want is for new national borders to be erected that restrict their flow of trade or capital.

An unofficial, symmetric trade boycott has already taken its toll on both the Spanish and Catalonian economies. Not even Spain’s biggest bank, Banco Santander, has escaped the fallout. An associate of mine who works for the bank recently reported losing a high-net worth Catalan client, with over four million euros invested in the bank. The customer had taken offence to Santander President Emilio Botin’s criticism of the Catalonian independence movement.

For Catalan banks such as La Caixa and Banco Sabadell, the stakes are even higher since so much of their business is based in Spain’s north-eastern province. Indeed, as the governor of the Bank of Spain, Luis María Linde, warned late last year, the Catalan independence movement could even pose an existential threat to the region’s banks.

Like all European commercial banks, La Caixa and Banc de Sabadell depend on the European Central Bank (ECB) for liquidity. But the ECB is only sanctioned to provide credit lines to banks of EU Member States, and only accepts assets issued by agents of the eurozone as guarantees for that liquidity. In other words, if Catalonia were ejected from the EU after declaring independence, its banks could well be starved of all liquidity. That’s not to mention the capital flight that would also no doubt ensue.

Hence, Fainé’s frantic lobbying efforts to try to change Mas’ course.

A Broad Based Movement

What Fainé and many other business leaders fail to realise, however, is that Catalonia’s blossoming independence movement is far more than just a one-man show. Nor can it be stopped by just one man — a fact that Mas himself has repeatedly acknowledged. “A majority of the Catalan people [by recent estimates, as many as 75 percent of the population] want to have the right to decide their collective future,” he said in aninterview with BBC Scotland.

Not all those people seek full independence from Spain — just the democratic right to choose or reject it. According to a recent poll by the Catalonian regional governing authorities, 60 percent of Catalans believe that Catalonia should be a new state in Europe. A somewhat narrower majority (52 percent) support the idea of complete independence.

And while Catalonia’s separatist movement may now have a clear top-down structure, it also has a very large grassroots element that serves as its main driving force. Key to this grassroots movement is the Catalan National Assembly (ANC, for its Catalan acronym), which helped to organize the million-man march on Catalonia’s national holiday, the Diada, on September 11, 2012, as well as the human chain that took place a year later.

According to some reports, elements of the organisation are now pushing for a unilateral declaration of independence on April 23, 2015, which in turn has prompted rumours that Spain’s Ministry of Interior might seek to ban the organisation for trying to foment a coup d’état against the central state.

Just as Giles Tremlett warned in a 2012 edition of The Economist, by building up Catalonian nationalist aspirations, Mas has jumped on a tiger he can not fully control. If he fails in his role or is rejected by voters, he will be quickly replaced by someone else – and probably someone more dogmatic and unpredictable, like the firebrand left-wing separatist Oriol Junqueras who late last year threw down the gauntlet to European bond holders with the threat of a one-week general strike in Catalonia.

“European institutions need to decide what should prevail: democratic principles or the de-facto actions of the (Spanish) state,” he said in a conference in Brussels. “If it is the latter, clearly we will deploy all instruments available to us.”

In the face of such threats, the natural temptation for Madrid and Brussels might be to browbeat the Catalans into submission. After all, a referendum on Catalonian independence is as unthinkable to the EU as it is to Madrid, bringing back bitter memories of Ireland, France and the Netherlands’ rejection of the EU treaty, not to mention Papendreu’s threat to put the second Greek bailout to popular referendum, which was followed by his immediate Troika-engineered replacement with ex-Goldmanite Lukas Papademos.

The last thing the eurocrats want is for people around Europe to get all uppity, thinking that they, too, have the right to decide their own collective destinies. However, deploying the old stick-without-a-carrot method of persuasion will, I believe, backfire on both Brussels and Madrid. Short of visiting an all-out economic siege upon the Catalonian region, with all the unforseeable costs and risks that could trigger, Madrid and Brussels’ only hope of nipping the movement in the bud before it gains unstoppable momentum is through pro-active negotiation – and with plenty of carrots on the table.

Impossible Demands

The problem is that most Catalans will not be satisfied unless they are given iron-clad guarantees that their culture, language and history will be respected and protected by Spain’s central government. They also seek greater economic freedom, including the right to raise their own taxes as well as control their own spending, just as the Basque Country has being doing for decades.

Neither of these demands, in particular the latter, are palatable to Madrid, for two reasons. Firstly, Spain’s current government is ideologically opposed to granting any more freedom to Catalonia than it currently enjoys. Indeed, quite the contrary. In its drive to further centralise and consolidate power in Madrid, it is going in the exact opposite direction, to the increasing fury of not only Catalans but regional politicians throughout the country.

Secondly, giving in to Catalonian demands would be tantamount to electoral suicide for Rajoy’s Popular Party (PP). You see, the political landscape is shifing in Spain, and for the first time in its history the PP no longer enjoys a virtual monopoly over the right half of Spain’s political spectrum. Two fledgling parties, the center-right Union, Progress and Democracy party (UPD) and the more extreme VOX party, now pose a very real danger to the PP’s electoral prospects, threatening to steal away many of its traditional voters in the upcoming European elections.

VOX’s founder, Santiago Abascal Conde, a popular political figure on the right and former PP militant, recently accused Rajoy of “betraying” the PP’s values. In the face of direct pressure on its own political terrain, the country’s prime-minister and his motley crew of incompetent, money-grubbing reactionaries have little choice but to play to the basest instincts of their party’s core voters – voters for whom Spanish unity is a life-or-death issue and who would oppose any attempt to placate Catalan nationalism.

A Fiscal Nightmare

Then there’s the economic dimension. Should Rajoy give in to Catalonia’s demands for greater economic freedom, Spain would suddenly find itself with a lot less money in the kitty. With Catalonia accounting for one-fifth of Spain’s economy and a vital source of tax revenues, Spain depends for its very fiscal survival on the constant flow of funds from its increasingly bolshie north-eastern region.

Unless Brussels is willing to step in to make up the difference – a very big “if” considering the sorry state of its own finances – Spain’s fiscal situation could well become untenable, especially in light of the fact that the country’s public debt has more than doubled since the burst of its real estate bubble five short years ago. Should the growing tensions between Madrid and Barcelona begin to infect investors’ perceptions of Spain’s sovereign risk, events could very quickly spiral out of control.

And with all talk of negotiations continuing to be dismissed out of hand by Madrid’s central government (for the reasons outlined above), opinions seem set to grow even more polarised. Now, every time Rajoy or one of his government ministers publicly addresses the Catalonian question, tens, if not hundreds, of new Catalan separatists are born.

If, as is expected, the upcoming European elections in May deliver a resounding majority for pro-independence parties in Catalonia as well as a broad rejection of the PP’s electoral programme, the war of words and gestures between Barcelona and Madrid could escalate beyond Brussels’ control.

Most of the protesters in Spain are peaceful, but there is an increase in radicalization, especially among young people, which is understandable due to the high level of youth unemployment, trader and portfolio manager Felix Moreno told RT.

On March 22, tens of thousands of Spaniards rallied in Madrid for a so-called ‘Dignity March’against EU-imposed austerity measures. The protest was peaceful in general, though later on some protesters switched to violence, starting to throw stones and bottles at the large numbers of riot police and attacked cashpoints and hoardings. The main demands of the protesters are an end to the so-called Troika-style cuts in Spain, more jobs and affordable housing.

RT:We've seen protests in Spain and other crisis-hit countries going on for years, yet nothing seems to change. So what's the point of anyone complaining?

Felix Moreno: To perfectly honest, it’s necessary for people to speak out because the government has had it very easy so far. The previous government made such a mess of it. Most people had a lot of patience and hope that this command was going to change this direction. Unfortunately, they haven’t [anymore] and I think we are starting to see the beginnings of the sea change in public opinion against this government.

RT:We've also seen a change in tactics as well. Last night in Madrid it was the police who received most of the injuries. Maybe there are some better ways for the people to get their voices heard than attacking the security forces?

FM: [Almost] all of the protesters are peaceful, but there is an increase in radicalization, especially among the young people, and this is understandable. But hopefully the silent and peaceful majority will prevail. Even though the anger keeps some building up because as you said there is over 50 percent youth unemployment in Spain and those people are getting very angry.

Anti-austerity demonstrators crowd into Colon square as they take part in a demonstration which organisers have labelled the "Marches of Dignity" in Madrid, March 22, 2014. (Reuters)

RT:The protesters are blaming the so-called Troika of the IMF, the European Central Bank and the EU for many of the country's problems. But isn't it really their own government that's landed them in this mess? Who is to be blamed?

FM: Well, definitely the Troika, the IMF and the EU have had an influence on the government policy, but the ultimate decision has lied with government in Madrid because they did have choice of how to balance the budget. They could have radically cut spending in sectors which are not directly beneficial or directly affect the welfare of the people and they've made a choice to keep the public sector just as big but cut in the most basic necessities: they've cut education spending, they've cut health spending and above all, they've increased taxes. It’s not said very much, but there has been more than 50 tax increases within the past two years since the government came to power and that’s a direct opposition to what they promised in their electoral program

RT:Have these massive tax increases been advertised on the Spanish media?

FM: The Spanish media has talked about it quite a bit but they have made much more noise about the cuts. In fact, that’s been three times as much revenue impact through tax increases than through cuts.

RT:Of course, austerity takes its toll on ordinary people but what's the alternative to get out of the crisis?

FM: Of course, the government's own economic experts came out with a report two years ago with real alternatives to it and then they did exactly the opposite of what they've actually published in their own books. What they said was “Two thirds of the cuts should be through reduction in government spending and privatization of the public companies and one third in tax increases.” They've done the exact opposite. They have increased VAT, which is a tax that most impacts the poorest, and they've cut spending in the most sensitive sectors. They have not reduced headcount in public, in government workers, they have not reduced spending of government companies and obviously they bailed out the banks.

If they could have the money used to bail out the banks and used it to save the weakest in the population, the public unrest would have been much, much less, the situation would have been much easier. Obviously, they had to let banks fail to do that and they were ready to do that.

and.....

Anti-austerity protesters march in Spain

Thousands of protesters from across Spain called for an end to austerity measures amid the country's economic crisis.

Last updated: 23 Mar 2014 00:58

Tens of thousands of protesters from across Spain converged in Madrid, calling for an end to EU-imposed austerity that has deepened poverty among the worst-off.

The "Dignity Marches" brought tens of thousands of people to the capital on Saturday, in support of more than 160 different causes including employment, housing, health and education.

Banners urged the conservative government not to pay its international debts and to tackle an unemployment rate of 26 percent, according to Reuters news agency.

The Organisation for Economic Cooperation and Development [OECD] says the economic crisis has hit Spain's poor more than in any other country in the 20-member group.

"I'm here to fight for my children's future," said Michael Nadeau, a 44-year-old entrepreneur, among the throng of protesters.

"For those who are in power we're just numbers. They value money more than they value people," he said.Bubble burst
A housing bubble burst more than five years ago, forcing a 41bn euro ($56 bn) bailout of the country's banks, squeezing homeowners and throwing millions of people out of work.

The government introduced public sector austerity measures to whittle down the deficit, provoking anger among middle and low income families.

Several groups attending Saturday's march had walked hundreds of kilometres from regions such as Asturias in the north and Andalusia in the south.

Official estimates of participants were not yet available, a police spokesman said, although march organisers earlier this week said they were expecting around 65,000 people.

Spain tentatively exited a recession in the second half of 2013, but unemployment soared with a labour reform which reduced the cost of hiring and firing.

The hoped-for boost in jobs has yet to materialise.

and....

Tahrir in Madrid: Tens of Thousands Demonstrate in Spain against Unemployment

Anti-riot policemen shoot plastic bullets during clashes with demonstrators at the end of a march dubbed "the Marches for Dignity 22-M" to protest against austerity in Madrid on March 22, 2014

Violence broke out at a mass demonstration in Madrid late Saturday when dozens of youths began throwing projectiles at police, who responded by charging at them.

Tens of thousands of people marched on the Spanish capital in a mostly peaceful protest against austerity policies, but an AFPjournalist said youths later began smashing windows and setting bins on fire.

For background, see: Adrià Rodriguez and Lotta Tenhunen

A southern democratic tide to overflow Europe

It’s been almost three years since the plazas of the Spanish cities called out for real democracy now. Still there is none, and the struggle to win that democracy has turned into tiresome banging of heads against the institutional blockage. More cuts. More exclusion. More evictions. More repression. More misery.

Yet even in this situation a multiplicity of democratic embrions are developing. In the practices and demands of the various initiatives born in or fortified by the uprising of the plazas in 2011, democracy is the common denominator. The destitution of the current political and economic regime dating back to the Transition from Franco’s dictatorship smacks of urgency. In the bipartisan game played by conservative PP and centre-left PSOE, everything will be finished off by the ongoing austerity policies. Jobs, education, healthcare, income, housing, social service and benefits, political, social and labour rights are at stake. The Troika of ECB, European Commission and IMF holds the strings.

In this framework enRed, a process of organization initiated in Madrid in the autumn of 2012, set out to compile the demands and proposals of the streets and plazas into one document. This document, called the Charter for Democracy, aspires to serve as a tool in the democratic revolution announced by the #15M. Since the first draft was formulated, the Charter for Democracy has passed through different movements both in Madrid and other cities. The critiques, improvements and additions proposed to it have been discussed on and incorporated to it. On Saturday 18th a first encounter was organized in Madrid to work on the Charter. Besides the document – seen as a processual, open protoconstitution–, there are still many open questions about the roadmap of its implementation and the organizational model to make it happen. The openness is not only a weakness. Heard in the encounter was: “I got interested because it was the only thing that was still open to participation in the process.”

While enRed opts for sharing a tool –the Charter– and has proposed a certain process –with its organizational model and strategy– the contents of the Charter are also a resource for others. During this spring, for better or worse, democracy will be the trending topic of the European elections. Spain is already in full blossom with new post-15M parties like Partido X, Podemos or EQUO popping up day by day. Many of the initiatives have surely been inspired from the Charter, and the copying should be seen as with open source software: a welcome contagion between organisms inhabiting the same ecosystem. In a political ecosystem of the 99% these organisms will have to find a way to relate to each other.

They need each other: as the institutional blockage doesn’t give up any space for regenerating the political structures from below, the question of breaking the blockage becomes imminent. If not breaking it a la Ukraine, how to do it? The real divisive questions between the different electoral strategies are the ones of representation and leadership on one hand, nationalism and views on Europe, on the other.

There are three factors in why the proposal of enRed excites us. Firstly, proposing as the only programmatic point the dissolution of Las Cortes and the convocatory of a constituent assembly.

Secondly, it understands that there is no democratic outcome from the current systemic crisis within just one nation state. Thirdly, the first two factors are presented assuming that the elections are not an end in itself but only one of the means. If there isn’t a democratic tide that wipes away the old, overflowing the neoliberal Europe with new forms radically democratic institutionality, there will only be a change of the flag in the palace of power.

What are the forms we can think for the democratic tide as the electoral acceleration of time hits the temporal autonomy claimed by #15M? Is a reappropriation of the electoral space possible –as tending towards talk-show debates and opinionism instead of organization from below as it always is– for the expansion of the process that the occupation of the plazas impulsed? Is it possible to hack the elections from below without reproducing the same calamities and succumbing under the diagnostic of the tristezas del poder?
About the authors

Lotta Tenhunen lives in Madrid where she participates in the post-15M struggles such as the movement for the right to housing. She has studied sociology, feminist studies, performative arts and journalism in Tampere, Finland. She tweets @sydansalama

Adrià Rodríguez is from Barcelona. He participates with the Fundación de los Comunes network and is developing the Kairós Project, a video archive on the emerging social movements throughout the Mediterranean. He tweets at @adriaral

This article is published under a Creative Commons Attribution-NonCommercial 3.0 licence.

Since 2008, Spain has been one of the poster children for Europe’s financial crisis as it grapples with a massive debt, an unemployment rate hovering around 26 percent, a downgrading from financial services across the globe and now a strong separatist movement from the country’s influential Catalonia region.

Angered over what many in the region say are policies implemented by the Spanish government that cripple Catalan autonomy and put them at a disadvantage thanks to heavy tax policies, separatist politician Arturo Mas and others in favor of independence have staged huge protests in the Catalan capital of Barcelona and are now plan a November referendum to vote on succeeding from Spain.

Despite speculation by many economists and financial service groups that an independent Catalonia is not going happen, the movement has caused worry not only within the borders of Spain but throughout the European Union with countries like Germany and France concerned about these new regions wanting to join the international body and what the economic repercussions.

Germany, which has already given the ailing Greek government two financial bailouts and is currently mulling over a third, is strongly opposed to any moves that could lead to more economic upheaval in the EU. As the political and economic powerhouse of Europe, the government of German Chancellor Angela Merkel does not want to become the EU’s main lender, which could put the country itself in a dicey economic situation, experts said.

“Germany is flatly opposed to more states in the European Union because they will have to foot the bill if there are more bailouts,” Mauro Guillén, a political economist the University of Pennsylvania’s Wharton School told Fox News Latino.

SUMMARY

With a $275 billion economy roughly the size of Portugal’s, 16 percent of Spain’s overall population and the home of some of the Iberian peninsula’s biggest industries – everything from banking to textiles to car manufacturing – Catalonia has long been one of the main drivers of Spain’s economy. But heavy taxation meant to spread the wealth to less prosperous regions of Spain has not only drawn the ire of some lawmakers in Barcelona but also put the region in so much debt that it asked Madrid for a $6.47 billion emergency loan back in 2012.

Lawmakers in Madrid have also voiced their adamant opposition to Catalonia’s independence push, which Spanish Foreign Minister José Manuel García-Margallo called “illegal” and a “clear parallel” with the current situation in the Crimea. Unlike the Scottish independence referendum that has the tacit support of British Prime Minister David Cameron, the Catalans push is deemed as a defiance of the Spanish constitution.

"The self-rule vote in Catalonia isn't possible because it violates article 1.2 of the Spanish Constitution which states the right to decide (on independence) is a matter for everyone in Spain and not just a part of the Spanish population," García-Margallo said on Monday. "Every square centimeter of Spain belongs to all Spaniards...and no political leader can deprive a citizen of Catalonia of the right to be Catalan, Spanish and European."

Spain is generally seen as a country comprised of various, separate regions that each have their own distinct culture and traditions. While its history is filled with independence movements, most famously in the northern Basque Country that saw widespread separatist violence, Catalonia’s move has both a cultural and finical twist in an economically fragile Europe.

With a $275 billion economy roughly the size of Portugal’s, 16 percent of Spain’s overall population and the home of some of the Iberian peninsula’s biggest industries – everything from banking to textiles to car manufacturing – Catalonia has long been one of the main drivers of Spain’s economy. But heavy taxation meant to spread the wealth to less prosperous regions of Spain has not only drawn the ire of some lawmakers in Barcelona but also put the region in so much debt that it asked Madrid for a $6.47 billion emergency loan back in 2012.

While the numbers of those who support independence from Spain falls somewhere between 30 and 60 percent, those Catalans in favor argue that an independent state would free them of Madrid bureaucracy and help them thrive thanks to the ability to branch out their business in other parts of the globe, not just in recession-scarred Spain.

“Basically Catalans want fiscal independence,” said Scheherazade Rehman, a professor at George Washington University’s Elliott School of International Affairs. “That’s the driving force to be independent and be more prosperous.”

Analysts along with lawmakers in Madrid, however, argue that Spain is slowly coming out of the recession and, on top of that, the majority of Catalonia’s business comes from within Spain with financial isolation on the Iberian Peninsula being a very real possibility for an independent Catalonia.

Many observers of the situation in Catalonia argue that the chances of independence are slim, but still see some worrying possibilities ahead for the future of Spain – and Europe – ahead of November’s referendum.

One possibility is the so-called domino effect, where more regions in both Spain and other parts of Europe push for their independence. The Spanish Basque Country is the most obvious example, as its roots go back to the mid-19th century and have at times fueled sectarian violence under the armed nationalist group Euskadi Ta Askatasuna (ETA).

Basque nationalism is particularly worrisome to France, which along with Germany is considered the EU’s main power. The Basque Country, or País Vasco in Spanish, extends into France and the French do not look kindly on giving up that part of the country to a newly independent nation.

Along with the Basques – and the Scots and the Irish Republican movements in Northern Ireland – there are separatist movements in countries throughout Europe including Flemish movements in Belgium, Bavarian groups in Germany and a slew of ones in France. While none of these movements currently have the support or force that the Catalans have, and in some cases the Basques, there are worries from European central governments that Catalan independence could give these groups further incentive — something that EU leaders in Brussels are also opposed to.

“The European Union is happy with its 28 nations,” Guillén said. “They don’t want to have to deal with 31 nations or more and all that implies.”

The threat of violence if the referendum in Catalonia passes and Spain doesn’t recognize the measure is also in the back of the minds of both European lawmakers and analysts, especially as news from Ukraine and Crimea dominate world headlines. When speaking of the situation in Crimea, Spain’s foreign minister called the Crimean split a “flagrant violation of an international constitution” and continuously made references to the Catalan situation during remarks in Brussels earlier this week.

“What is going on in Ukraine should be a stark reminder of what can go wrong,” Guillén said.

Despite these concerns, many economists and financial service groups see a slim possibility of Catalan independence. Reassurances from Catalan policymakers that the independence movement will only proceed along legal means and their want to remain in the euro area have assuaged some concerns in the financial sector.

“Our central scenario assumes that independence will not materialize within the next two to three years,” Moody’s Investors Service noted in a report released earlier this month. “Spain’s and Catalunya’s ratings will continue to be mainly driven by the economic growth outlook, prospects for budgetary consolidation and debt reduction.”

Along with financial predictions, the main driving force behind the failure of Catalan independence is the divide of the region’s powerful business class. While many share the political frustration with Madrid, they also worry about being left in isolation — especially in regards to its membership with the E.U.

What could ultimately decide the fate of Catalan independence is how Spain deals with its economic crisis. If things go well, the Catalans have less of a crutch to lean on, but if the economic situation continues to worsen, the region has more force for an independence push, Rehman said.

“These things serve as a catalyst and move things forward one way or the other,” she added.